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Catalyst Arrives: MBIA Wins Summary Judgment Against Countrywide; Bad News For Bank of America

Tyler Durden's picture


The catalyst so many have been waiting for, and the nearly 30 million shorts dreading, has arrived. From Judge Eileen Bransten: "ORDERED that MBIA Insurance Corporation’s motion for partial summary judgment is granted to the extent that MBIA Insurance Corporation (“MBIA”) must establish for its claim of fraud that misrepresentations by the defendant(s) induced MBIA to issue insurance policies on terms to which it otherwise would not have agreed and that MBIA is not required to establish a direct causal link between defendant(s) misrepresentations and MBIA’s claims payments made pursuant to the insurance policies at issue; and it is further ordered that MBIA's motion for partial summary judgment is granted to the extent that MBIA must establish for its claim for breach of the Insurance Agreement against Countrywide Home Loans that CHL's breach of warranties in the issued insurance policies' transaction documents increased the risk profile of the issued insurance policies and MBIA is not required to establish a direct causal connection between proven warranty breaches by CHL and MBIA's claims payments made pursuant to the insurance policies at issue, and it is further Ordered that MBIA's motion for partial summary judgment is granted to the extent that MBIA may seek rescissory damages upon proving all elements of its claims for fraud and breach of representation and/or warranty." In short, this is core catalyst that Manal Mehta expected and which BTIG envisioned to justify its $22.50 price target. It is also the judgment that will make Bank of America's case law life a living nightmare going forward (naturally following repeated failed attempts at appealing). Lastly, any and all shorts in the name may have their work cut out for them.

UPDATE: MBI is trading aove $13 in after-hours...


Full summary judgment:


h/t Manal Mehta


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Tue, 01/03/2012 - 17:15 | Link to Comment Irish66
Irish66's picture


Tue, 01/03/2012 - 17:20 | Link to Comment ACP
ACP's picture

No worries, it's priced in!

...just like the housing crisis, the euro crisis and ARMAGEDDON!

Tue, 01/03/2012 - 17:25 | Link to Comment RichardENixon
RichardENixon's picture

The only thing not currently priced in is a massive gamma ray burst frying the entire planet, leaving no organic matter. S & P will probably close the year below 1200 in that scenario.

Tue, 01/03/2012 - 17:32 | Link to Comment ACP
ACP's picture

With no sellers left, the HFTs will push the SPX to infinity.

Tue, 01/03/2012 - 17:36 | Link to Comment RichardENixon
RichardENixon's picture

Hadn't thought of that. Unfortunately, it's difficult to back test this type of situation.

Tue, 01/03/2012 - 17:36 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Nope. If all life was extinct, funny enough, the bots would still lift the bid at the open......until the power plant runs out of fuel

Tue, 01/03/2012 - 18:08 | Link to Comment BlackholeDivestment
BlackholeDivestment's picture

''...priced in Armageddon'' 

                       Haa ha, now that's ah good error.

It's definitely ''Public Zombie Land upon us now.''

Tue, 01/03/2012 - 22:00 | Link to Comment Buck Johnson
Buck Johnson's picture

This is getting better and better, this whole game is coming apart.

Tue, 01/03/2012 - 17:17 | Link to Comment laomei
laomei's picture

Death to (Bank of) America

Tue, 01/03/2012 - 18:28 | Link to Comment Widowmaker
Widowmaker's picture

No way, taxpayers will take it in the ass like armenian (kardashian) sluts.

Too big to swallow, put it right in there...

Tue, 01/03/2012 - 17:18 | Link to Comment FoieGras
FoieGras's picture

Oh wow. BAC plunging in after hours. NOT!

Tue, 01/03/2012 - 17:27 | Link to Comment Tyler Durden
Tyler Durden's picture

It did enough of that in 2011, incidentally as predicted right here back in October of 2010: Can You Spell U-N-D-E-R-R-E-S-E-R-V-E-D? If Not, Here Is A Visualization Aid

Tue, 01/03/2012 - 17:39 | Link to Comment Pladizow
Pladizow's picture

I could tolerate some more!

Tue, 01/03/2012 - 18:07 | Link to Comment LetThemEatRand
LetThemEatRand's picture

It will take time for most investors and computers to figure out how bad this could be for BAC and other banks as well.   Of course it could be reversed by a higher court (if I'm not mistaken, the "Supreme Court" in New York is not the highest court in the state), but if this sticks it is a big deal.  I think BOA even listed this dispute in regulatory filings as one that could have material impact on its bottom line if BAC lost (it has), which means BAC considers it a very big deal. 

Tue, 01/03/2012 - 21:10 | Link to Comment rosiescenario
rosiescenario's picture

...if it sticks....'someone' might need to point out to the next judge further up the food chain reviewing the appeal that there is a 'national security interest' issue....I rather doubt that this case will ultimately be decided based on the law and who broke it.

Tue, 01/03/2012 - 17:34 | Link to Comment Boilermaker
Boilermaker's picture

It's difficult to 'plunge' from a first story window.

Tue, 01/03/2012 - 17:38 | Link to Comment RichardENixon
RichardENixon's picture

If it drops $5 a share, that's an 86% plunge.

Tue, 01/03/2012 - 17:43 | Link to Comment Boilermaker
Boilermaker's picture

You must have missed the Fed induced trampoline bounce (still going) when it touched $5.  They'll defraud Jesus Christ himself if they need to.  It's all bullshit anyway.

Tue, 01/03/2012 - 17:19 | Link to Comment duncecap rack
duncecap rack's picture

What would happen if BOA drops countrywide like they said they might?

Tue, 01/03/2012 - 18:45 | Link to Comment Widowmaker
Widowmaker's picture

Shit, bitch.

You the taxpayer still own it -- dripping with fraud from top to motherfucking bottom.

Record bonuses abound, zero prosecutions and Mozillo gets paid.

Drink up sukka you own the bar.


Tue, 01/03/2012 - 21:07 | Link to Comment oogs66
oogs66's picture

They should - and Merrill too

Tue, 01/03/2012 - 17:20 | Link to Comment American34
American34's picture

What does this really mean anyway?

Tue, 01/03/2012 - 17:20 | Link to Comment Sun Tsu
Sun Tsu's picture

BAC to Appeal to the CONgress?

Tue, 01/03/2012 - 22:06 | Link to Comment UP Forester
UP Forester's picture

With Lloyd Shitstain as prime lobbyist?

Tue, 01/03/2012 - 17:24 | Link to Comment Global Hunter
Global Hunter's picture

Whats the over-under on the number of days until BoA goes bust, customers deposits go "missing" and end up as JPM's assets?

Tue, 01/03/2012 - 17:41 | Link to Comment Pladizow
Pladizow's picture

Yeah, swpet under the carpet, not to be heard of again was that story of BAC derivatives being repositioned and back stopped by FDIC?

Tue, 01/03/2012 - 19:34 | Link to Comment Amish Hacker
Amish Hacker's picture

Fortuitous timing on that one, wasn't it? Get all the derivative garbage onto the depositors' side of the ledger, just in time for a huge judicial nail in the BAC coffin.

Tue, 01/03/2012 - 18:08 | Link to Comment SillySalesmanQu...
SillySalesmanQuestion's picture

+ 90 days green

- 90 days red

Tue, 01/03/2012 - 18:32 | Link to Comment LeBalance
LeBalance's picture

based on this, someone will take it in the shorts.

Tue, 01/03/2012 - 17:34 | Link to Comment Caviar Emptor
Caviar Emptor's picture


2007 CMBS Loan Maturities Portend Payback Issues in 2012




Beginning this month, the first of the 2007 five-year CMBS balloon loans will come due. 

The balance of CMBS conduit loans liquidated in November skyrocketed, posting the highest total since Trepp began tracking this number in January 2010. The November total was 17% higher than the previous record set in June 2011. At $2.1 billion, liquidations were 60% higher than the 12 month moving average of $1.3 billion per month.

Tue, 01/03/2012 - 17:42 | Link to Comment Rainman
Rainman's picture

Looks like can, maturity the only option if there's cash flow. CMBS has recently been off radar,,,thanks, Cav, for the reminder.

Tue, 01/03/2012 - 17:47 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Coming back to the front burner this year as 2007 peak-loans are due....and defaulting. That will leave big holes to plug. Fed will almost certainly pick up the tab, taking these on the balance sheet as Bernanke warned last fall. Now you know why he said that

Tue, 01/03/2012 - 17:42 | Link to Comment AccreditedEYE
AccreditedEYE's picture

Private Equity is drooling over the opportunities in CRE between now and 2017. Ya gotta have bucks to profit from this oncoming tsunami... that is, of course, if the bucks are of any worth when you are ready to exploit said opportunity.  

Tue, 01/03/2012 - 17:50 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Think again. Next article I posted (by S&P) shows vacancies in the US at historic highs. Nobody wants to wade into those toxic waters. They know that there has to be massive consolidation, way way too much commercial space available that the real economy can't support. And won't for decades still. That stuff will just glow like nuclear waste, nobody will touch it

Tue, 01/03/2012 - 18:04 | Link to Comment AccreditedEYE
AccreditedEYE's picture

As sure as I sit and type this reply to you, Schwarzman has Jon Grey working out strategy for this situation. And every other 2 bit PE shop will show up late to the game for them to sell to. Not saying CRE will not implode Cav, I'm saying they are COUNTING on it.

Tue, 01/03/2012 - 17:53 | Link to Comment NotApplicable
NotApplicable's picture

They'll likely learn the lesson of paying nickels on the dollar when the assets aren't even worth pennies. Other than tax loss write-offs, I can't see anyone profiting from empty strip-malls that will never fill with viable businesses. Well, other than the car dealers who use the lots for their channel-stuffed inventory.

Tue, 01/03/2012 - 18:39 | Link to Comment AccreditedEYE
AccreditedEYE's picture

PE never looks at just one angle... think about what some of the smartest financial minds posted on ZH have been telling people to do: Own REAL assets. Own commodities, own REAL ESTATE / REAL Property... and own it in several countries. Look at the details of the EOP transaction...

Tue, 01/03/2012 - 19:42 | Link to Comment scatterbrains
scatterbrains's picture

The first time I'll buy into a strip mall reit is when it's put together to convert properties into a franchise paintball battle simulation zone. Where club members can duck and dive through store fronts and down stairwells shuck'n and jive'n and shooting the joint up....otherwise I'll wait it out.


Tue, 01/03/2012 - 19:57 | Link to Comment SystemsGuy
SystemsGuy's picture

I have to admit, I'm perplexed too. With a significant percentage of retail and corporations going virtual, what you're buying there is land with a high remediation cost. Sure, you'll get it fire sale prices, and some of that property may very well be worth something significant in ten years, but I'm guessing that the bulk of this property is likely to be pretty much worthless and will be until about 2035-40 or so when demographics shift back into a more favorable mode: by 2036, the first baby boomers will be ninety and the median BB age will be 81, so a fairly steep die-off at the upper end even as the next large bulge (the Millennials) hits early middle age will be taking place by then. Whether that will equate to a renewed economy at that point is debatable, but I just don't see real estate coming back in a big way much before then.

Tue, 01/03/2012 - 21:46 | Link to Comment 11b40
11b40's picture

Things that can be converted to low cost housing and farm land.  That is about all the RE I would have interest in for a good long time.

Tue, 01/03/2012 - 23:48 | Link to Comment Hephasteus
Hephasteus's picture

But that's not how the system works. The system works by promises and giving real goods for nothing.

The system doesn't WANT to inflate real estate into bubbles but it's how it "legally" or mind fuckedly "prints" the money. It is completely reliant on growing government growing government wages growing house prices and people moving and refinancing every 5 to 7 years and only 67 percent or less of the population being allowed to "counterfeit". Otherwise the "illusion" of it all comes crashing down and people get to nosey and want to figure out how it works. The banks make all house sellers. Whole based on a promise of the buyer. It got to the point where it nearly made all corportate retailers "whole" based on the promise of credit card holder. It doesn't care about when it doesn't work. It only cares about the times when it does work.

Online retailing is fucking doomed. As it allows for further counterfeiting based on computers and "cloning" based on computers. Computers attempt to distort the value system by taking something created and "cloning" or copying it. Leveraging the creation into infinite clones.

I'm not saying that the system won't slip in adhering to it's countefeiting rules. I'm just saying that once it slips too much the underlying support system of it which is "magical" and emotional in nature stops being able to "pass the buck" off onto the participants in the system and the blame game that works so well starts twisting off into a nonsense unacceptable accusation. The underlying system is corrupt but is still limited by it's own rules.

Tue, 01/03/2012 - 17:26 | Link to Comment sabra1
sabra1's picture

nothing seized bank accounts can't fix!

Tue, 01/03/2012 - 17:27 | Link to Comment azusgm
azusgm's picture

Most excellent!!!

Tue, 01/03/2012 - 17:38 | Link to Comment Caviar Emptor
Caviar Emptor's picture

S&P Expresses Concern About 2012 CMBS Market


Two new reports issued by Standard & Poor's (S&P) are raising significant concerns about the state of the U.S. commercial mortgage-backed securities (CMBS) market.

One report focusing on the industrial sector within commercial real estate notes that the sector reached a 22-year high on its industry CMBS delinquency rate, which measured at 12.05%. S&P also determined that 47% of rated industrial CMBScollateral has experienced declines in net operating income (NOI) since issuance, and half of these loans are reporting decreases greater than 20%.

"With industrial vacancy rates at historical highs and rents remaining stagnant or falling, we don't expect much near-term improvement in NOI at the property level, and it could even decline for certain properties and markets," says Standard & Poor's credit analyst 

S&P reports that $55 billion of U.S. CMBS loans are scheduled to mature next year 2012, including $19 billion in 2007-vintage maturities. S&P warns 50% to 60% of the 2007 vintage five-year-term loans maturing next year may fail to refinance

Tue, 01/03/2012 - 17:32 | Link to Comment ebworthen
ebworthen's picture

"Mr. Moynihan?  Chairman Bernanke on the phone for you."

"Brian?  This is Ben.  Don't worry, you have unlimited backdoor cash from us at 0.05%.  If things get really bad we'll just shovel the crap on your books to Fannie/Freddie."

"Thanks Ben, you 'da man!"

"No problem.  Hank and Jamie say hi.  We're having lobsters and caviar for lunch, care to join us?"

"Sure, I'll bring the single malt and the cigars; tell Hank I miss Blankfein's dirty jokes about bent over taxpayers."

Tue, 01/03/2012 - 17:38 | Link to Comment Tijuana Donkey Show
Tijuana Donkey Show's picture

I doubt the Bernak is eating lobster, he has a kosher swagger. He's eating lox with Blankfein, while Brian has some Paula Dean specials flown in.

Tue, 01/03/2012 - 17:40 | Link to Comment King_of_simpletons
King_of_simpletons's picture

The stock ramp up is to cushion more bad news coming later this year.

Also, this one from LA times:,0,3538902.story

Tue, 01/03/2012 - 17:42 | Link to Comment midgetrannyporn
midgetrannyporn's picture

The tan man laugheth.

Tue, 01/03/2012 - 17:53 | Link to Comment benjamin_1114
benjamin_1114's picture

It's just another reason BAC will file BK on Countrywide and flush that big turd.

Tue, 01/03/2012 - 19:02 | Link to Comment azusgm
azusgm's picture

It's about darned time to purge the zombies from the system. Countrywide is a deserving place to start. A federal judge and a bankruptcy trustee should have been on the case years ago. The icing on the cake would be a perp walk by Agent Orange. Even better would be to see Agent Orange leading a parade of perp walkers.

Tue, 01/03/2012 - 20:14 | Link to Comment waterhorse
waterhorse's picture

Too Big To Flush?

Tue, 01/03/2012 - 18:06 | Link to Comment youngman
youngman's picture

So they charge 12% interest..but what do they pay you to use your money in your savings this is all leagal used to be called robbery a few years back..

Tue, 01/03/2012 - 18:18 | Link to Comment Waterfallsparkles
Waterfallsparkles's picture

Ambac was Bankrupted before their day in the sun.  I think JPM had way too much to lose by letting them survive.


Tue, 01/03/2012 - 18:27 | Link to Comment prodigious_idea
prodigious_idea's picture

Derivatives biz is part of BAC problem.  Adding to misery will be 4Q2011 ramp-up in foreclosures following legal release.  Imminent wave of delinquencies/foreclosures won't offset new loans.  Recent news stories that BAC is reducing/cancelling small biz LOCs cuts into advertised core business.  Countrywide legacy remains.  Problems, problems, problems.  Fed steroid shots have done little to provide price stability in BAC.  Am pleased with decision to short at today's closing price.

Tue, 01/03/2012 - 18:51 | Link to Comment PulauHantu29
PulauHantu29's picture

Wheretofor, henceforth, in the event that, unless otherwise agreed, a priori, ad hoc, modus operandi, arguendo, magna carta, and therefore, ipso facto....


Tue, 01/03/2012 - 19:00 | Link to Comment Tunga
Tunga's picture

Summary Judgment. Who knew?

Tue, 01/03/2012 - 22:11 | Link to Comment Tunga
Tunga's picture

More at; Put up or Shut up.

Tue, 01/03/2012 - 19:32 | Link to Comment tony bonn
tony bonn's picture

i love it when shit hits the fan and blows back into the face of the shitter....

Tue, 01/03/2012 - 20:21 | Link to Comment indio007
indio007's picture

This suit was identical to the AMBAC v JP Morgue suit. The legal basis is definately identical judging from the complaint.

The only question left I guess is who has liability for Bear Sterns. Jp Morgue only wants the upside and no downside.

Tue, 01/03/2012 - 20:49 | Link to Comment Shizzmoney
Shizzmoney's picture

Please say this will begin the lulzy fall of the most epic fail bank, ever.

Tue, 01/03/2012 - 21:13 | Link to Comment Rearranging Dec...
Rearranging Deckchairs's picture

I can't decide whether its brilliant or idiotic that New York calls its lowest courts "Supreme."

Tue, 01/03/2012 - 21:33 | Link to Comment Schmuck Raker
Schmuck Raker's picture

Analysis on the decision via Naked Capitalism:

Win for MBIA in Ruling Against Countrywide (Updated: Maybe Not Really)
Tue, 01/03/2012 - 22:57 | Link to Comment bill1102inf
bill1102inf's picture

BAC unfazed ??

Tue, 01/03/2012 - 23:18 | Link to Comment non_anon
non_anon's picture

Ba Ba Ba Ba Bad to the Bone

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